Economist Bismarck Rewane has faulted the three percent allocated for oil-producing communities in the just-assented Petroleum Industry Bill 2021, saying it is not the ideal compensation.
The Senate and House of Representatives had passed the PIB on July 15 and 16 respectively with President Muhammadu Buhari signing the document a month after.
“Is the three percent the ideal, optimal compensation for the host communities? I will say, ‘No’ because I come from there but at the same time, what is more, important for the oil communities is the transparency of the money that is spent and the impact it has rather than having a tea party,” Rewane, the Managing Director of Financial Derivatives Company Limited, said during an interview on Channels Television’s Politics Today on Monday.
In the bill, host communities in the Niger Delta are expected to benefit from three percent of an entity’s actual yearly operating expenditure of the preceding financial year in the upstream, midstream and downstream sectors.
All contributions will be deposited in a trust fund for host communities.
According to a draft of the PIB, the trust fund will enhance peace and cordial relationship between oil companies and host communities.
However, some southern leaders had advocated for the percentage to be increased.
The Chief Executive Officer (CEO) of Financial Derivatives Company and a member of the Economic Advisory Council (ECA), Bismarck Rewane, says Federal Government’s obedience to court orders will boost investors’ confidence.
Rewane, stated this on Wednesday during an interview on Channels Television’s Business Morning, following the release of the RevolutionNow protest, Mr Omoyele Sowore and a former National Security Adviser, Mr. Sambo Dasuki by the Department of State Service (DSS).
“The more liberal, the more tolerant the government is, the more confidence investors will have. It is not the release of people, it’s the obeying of court orders.
“If for example, I take the government to court because my tax liability is higher and the court says go and refund and the court refuses, those are the things investors are looking at.
“If there is a dispute, they need remedies. The government has to be a good example of obedience to the rule of law because they set the law. This move now shows that the government is law-abiding,” he stated.
Speaking about the rate of Nigerians seeking political asylum, the economist said the number has dropped from 60,000 in 2018 to 57,000 currently.
According to him, the decrease in the statistics is as a result of the decline in the misery index which translates to political asylum seekers.
Meanwhile, Rewane also stated that life expectancy in Nigeria is now 56 years compared to 2018 when it was 54 years.
While commenting Governor Babajide Sanwo-Olu’s administration for some achievements recorded upon assuming office in May, he, however, wants the state government to tackle insecurity for businesses to thrive.
Speaking on Nigerians seeking political asylum, the economist said the figure dropped from 60,000 in 2018 to 57,000 currently.
According to him, the decrease in the statistics is as a result of the decline in the misery index which translates to political asylum seekers.
On the life expectancy rate in Nigeria, Rewane explained that Nigerians live at 56 years compared to 54 years in 2018.
The Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, Bismarck Rewane, is of the opinion that Nigeria lacks the mental discipline to execute plans for the growth of the economy.
Mr. Rewane stated this on Tuesday while speaking at The Platform, a programme by the Covenant Christian Centre to mark Nigeria’s 59th Independence Day.
He said, “Nigeria does not lack economic ideas but lacks the mental discipline to execute the plans.
“What our economy needs is a mental discipline to learn from the mistakes of the past. Our vulnerability has increased because we have not learned from the mistakes of our past and that of other countries”.
Mr Rewane who was speaking with the theme, ‘Re-designing The Nigerian Economy With New Ideas’, explained that in the Nigerian economy, the things outside our control are more than things within our control.
“When the institutions of conflict resolution are broken, the alternative to what you have is anarchy.
“The social contract between the rulers and the ruled is very important as its so cheap to just talk than to act.
“What we have control over is our credibility and leadership. Social credibility over what we say is important because talk is cheap. Credibility does not come from what we say but what we do”.
He further stated Nigeria’s economy can only get better with intellectual honesty and mental discipline. “You cannot buy intellectual honesty.
“The mental discipline is more important than physical discipline. The thought process that goes into conceptualising and executing a plan is very important.
According to him, Nigerians are tired of being told one thing and then seeing another.
“If what you see is different from what you feel, then there is a problem of credibility”.
Economic analyst, Bismarck Rewane on Wednesday cautioned the Federal Government to be mindful of creating what he described as ‘smugglers paradise’ through the new directive to the CBN on food importation into the country.
Rewane in an interview on Channels Television programme, Business Morning, provided some insights into policy.
According to him, although the intention behind the policy is a step in the right direction, it should be carefully managed not to encourage an increased level of smuggling while helping local industries.
“Imported food items will no longer be available for the official foreign exchange list. This means you will have to buy the money in the parallel market and induce the custom officers, so basically what you are going to create is the smugglers paradise.
“What has happened since we banned the importation of rice? The importation of rice has dropped but correspondingly, the importation of rice into the Benin Republic and Togo has increased.
“So, basically these regulations helped in a certain respect but atimes it ends up like playing with mirrors. The food-producing states will latch onto this and say that we need monetary policy support from the Central Bank, Intervention, Anchors Borrowers, additional support, customs to protect, among many other demands,” he said.
Rewane’s insights come a day after President Muhammadu Buhari directed the Central Bank of Nigeria (CBN) to stop providing foreign exchange for importation of food into the country.
The President explained that the directive was important considering the “steady improvement” in agricultural production and attainment of “full food security” in Nigeria.
The CEO of the Financial Derivatives Company, Bismarck Rewane, has presented a scorecard of Nigeria’s economy in the last five years.
Speaking at the Town Hall organized by Channels Television ahead of the Inauguration Day, he reeled out what he described as 19 indicators and how they influenced the nation’s growth in the last five years as well as predictions for the next two years.
According to him, of the 19 indicators, 11 moved negatively while nine moved positively.
He, however, noted that what was most important was the citizens’ scorecard.
Staple foods such as Garri, Rice and Beans were sold for 13,500, 9,500 and 14,000 in 2014, but now, a bag of each costs 6,500, 15,000 and 19,000 respectively.
Tomatoes which cost N4,300 for a 50kg bag, has now also gone up by 319% to become N18,000.
He explained that the state produces about 40 per cent of the country’s oil and gas export earnings, which makes it critical to the financial stability of the Nigerian economy.
The economist said, “Rivers State produces about 400,000 barrels of oil a day, about 20 per cent of our total production and export. Bonny LNG is in Rivers State and 12 per cent of our export comes from there – almost 35 per cent of our export earnings.
“Nigeria is oil and gas-dependent and Rivers State is critical to the financial stability of the Nigerian economy — two refineries, the Onne Logistics Base, International Airport. Rivers State is critical after Lagos; it is the most important business centre.”
Rewane, however, decried the rate of unemployment in the state, considering the rich resources and infrastructure there.
He said, “On one hand, Rivers State GDP is over $70 billion, second largest after Lagos State; but it has all of these facilities and it has one of the highest on the unemployment rate in Nigeria.”
“There is a massive contradiction; resource-rich, a lot of infrastructures, at the same time, high unemployment, politically extremely explosive,” he added.
The economist urged those responsible to resolve the political situation in the state to get things working.
He insisted that something has to be done while the political situation must be reduced to normal.
“If we can get Rivers State to work properly in terms of politics, economics, infrastructure, it will be a good boost for the Nigerian economy,” said Rewane.
He added, “The political misunderstandings which led to political violence, conflict are things that need to be resolved and those are within human control.
“The other things are there — resources, infrastructure; all we need to do is to tap into it to make it productive.”
Rewane also reacted to a statement credited to the spokesperson for Vice President Yemi Osinbajo, Mr Laolu Akande.
Akande had revealed earlier during the programme that the Muhammadu Buhari administration spent N2.7trillion to develop the nation’s infrastructure.
The Financial Derivatives boss, however, stated that the money said to have been spent by the government was far below what was expected of it considering the nation’s Gross Domestic Product Deflator (GDPD).
He said, “What we have to understand is that spending money nominally and having an impact are two different things.
“Laolu Akande talked about N2.7trillion on infrastructure; if you convert that to dollars in an economy which is $400billion in GDPD in one year, we are spending less than one per cent of your GDP on infrastructural investment. What we need to spend … is about 10 per cent of GDP.”
When asked if there could be a further slip into recession considering the latest report of the National Bureau of Statistics (NBS) on the economy, Rewane said, “there could be, you could slide back into it.”
He, therefore, asked the government to focus more on creating an enabling environment where investment would thrive and encourage more investors to do business in the country.
He disclosed that there was a time when about $293 million was taken out of the Central Bank of Nigeria (CBN) by a presidential order and there was no foreign exchange in the country for two weeks.
Although he did not state if it was during the present administration or the previous ones, Akande explained that situation showed the level of poverty in the country and why Nigeria went into recession.
He insisted that the nation was in good hands and already heading towards a prosperous direction.
“The point is that we are clearly in the right direction,” he said, adding, “We are taking this country to a time of prosperity. The figures show that there is a growth”
“We came out very quickly out of recession because of the solid policies of this administration and in terms of where we are investing the resources of this country in, it is very clear that it is going to be better and better, steadily.”
Akande revealed that the Federal Government has invested not less than N2.7trillion to develop the nation’s infrastructure.
He said this was the first time a government would spend N2.7trillion in two budget cycles in the history of the country.
The Chief Executive Officer of Financial Derivatives Company Limited, Mr Bismarck Rewane, also spoke on Politics Today.
He said while it cannot be disputed that the economy was improving, the people have yet to feel the impact.
“If we look at the growth numbers that came out recently, 14% growth was in the oil sector, then we have insurance and some other areas where people are not employed.
“The sectors that employ people which are interest rate sectors are the ones that are actually slow and contracted; therefore I submit that if we don’t bring down interest rate (we have had 22 months of no change in interest rate) to stimulate and increase economic activity, then all of these things are going to…”
Rewane, who is also the Managing Director of Financial Derivatives Company Limited, stressed the importance of shifting focus from sectors that are growing but not creating jobs to the jobs-providing sectors.
“The underlined thing is that unemployment and underemployment has increased in all the three quarters that we have had positive growth. We have had higher unemployment. Therefore the sectors that are growing are not the ones that are employing.
“So we now have to shift emphasis and focus on areas where there is labour intensive activities, these people can create jobs.
“The unemployed man becomes a dysfunctional member of the society who disrupts, who kidnaps and that destroys everything,” he said.
The economists also noted that despite government’s noble intentions the impacts are not felt due to these impediments while Nigerians are eager to see results and impacts.
“It is quite interesting that after two years of seamless supply, all of a sudden there is a shortage. Some say the shortage is contrived some say it is sabotaged, some say its ineptitude of logistics and planning but what is clear is that the parameters that were used on May 15, 2016 when the price of 145 was arrived at, were that the exchange rate was 285.
“The price of oil at that time was about $42 a barrel and the landing cost was at about the same range about 145, now circumstances have changed.
“The exchange rate has been devalued significantly, the price of oil is at $68 a barrel today and therefore, the landing cost cannot be the same.”
He said this when he appeared as a guest on Channels Television’s political program, Politics Today.
Speaking further, Mr Rewane explained that there won’t be any imminent price hike because it would be suicidal.
He said: “The minimum wage was determined in 2019 at N18,000 which was $200 at that time – it is barely $40 today. If you increase the price of petrol which is a subsidized price today, you will be imposing a lot more hardship on the people.
“It is not politically expedient, it is economically intolerable, So what the government has to do is come out clean and say this is the amount of subsidy we are paying – this is how we have to do it because the people have to be carried along, it is not possible at this point in time to have a subsidy-less petrol price because it is so critical – we have to come out clean,” he added.
Popular economist and Chief Executive Officer of Financial Derivatives Company, Mr Bismarck Rewane, says the 2018 budget proposal is not audacious enough.
President Muhammadu Buhari had on Tuesday presented to the National Assembly the 2018 Appropriation Bill which proposed a total expenditure of N8.612 trillion naira, which is an estimated 16 percent higher than the figure for the 2017 budget.
When inflation is factored in, however, there has been no real increase in total expenditure, according to Mr Rewane.
“The figure of N8.6 trillion is 15.7 percent higher than the budgeted figure for last year. The rate of inflation this year is 15.9 percent. So, in real terms, there has been zero growth in expenditure,” he said during an appearance on Channels Television’s Politics Today, about four hours after the budget presentation.
“Because a thousand naira that you had in January will be equal to a thousand naira less 15.5 percent in December. So, if you have increased your budget expenditure from N7.4 trillion to N8.6 trillion which is 15.7 percent, effectively, you have actually increased your budget by zero.”
For Mr Rewane, when the parameters of the budget and the realities of the Nigerian economy are taken into consideration, it is clear that this is a time for economic stimulus, a time to increase spending and to be audacious.
“Not just for the sake of spending, but for impactful spending,” he said. “What the President has done today is an impactful spending programme, but my fear is that it is not audacious enough; it is not bold enough”.
Another problem the economist has with the budget is its exchange rate assumption. President Buhari had told lawmakers that an exchange rate of N305/per dollar was used in drafting the budget, an assumption which contrasts with the realities of the foreign exchange market.
“The effective exchange rate by the IE Window (Investors and Exporters Foreign Exchange Window) today is N360 (per dollar). Let us stop deceiving ourselves that there is an exchange rate of N305 (per dollar),” Mr Rewane said. “The exchange rate today is N360 and N363 on the parallel market.”
Mr Rewane, however, has no problem with the assumption for crude oil export, which is $45 per barrel.
“The budget assumption of $45 per barrel is very realistic because today, oil is trading at $64 per barrel which is 40 percent higher; there is a 40 percent headroom,” he said.
“The production estimate of 2.3 million barrels per day is a bit optimistic but if you add our condensates to the picture of what we are actually producing, it is about fair value.”
Without the condensates, there is a 20 percent shortfall in what is actually being produced and what the government wants to achieve, the economist added, noting, however, that even such a shortfall is covered by the current price of crude which is 40 percent higher than the budgetary assumption.
Mr Rewane also believes the budget deficit at about two percent of GDP is in order as it is “within the convergence area for the West African region”.
Although Mr Rewane admitted that the budget is one of consolidation, he stressed that “you only consolidate after you achieve the growth you want to achieve”.
“We are not there yet, we are still at 0.55 percent growth,” he said.